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Fabless IC firms facing quote hikes at backend partners

Taiwan's IC designers are facing increasingly tight capacity and resultant quote hikes at their backend partners though foundry capacity they booked in fourth-quarter 2020 are being fulfilled starting late first-quarter 2021, according to industry sources.

Major backend houses including ASE Technology, Powertech Technology and King Yuan Electronics have all raised quotes, particularly for wire bonding process, amid widening capacity crunch, with backend delivery lead times already extending to 1-2 months from 1-2 weeks, the sources said.

Chip vendors still have to pay higher costs for backend services despite increases in their orders, which is unusual, as prices usually would come down when orders rise, the sources said. This also happened in second-half 2020 when IC designers were vying for foundry capacity support by offering increases in prices and orders.

Nevertheless, the sources stressed, only those IC vendors with secured capacity support from foundry and backend partners can win more market shares, and they can eventually pass increased costs onto downstream clients, further driving up their revenues, gross margins and net earnings as a result.